Navigating the challenges of Determining the actual cost

First, we need to understand the difference between the two.
The cost of the employee not only includes their salary but there are many hidden costs with it. Such as

• Fringe ( Bonus, paid paternity leave, stock options )🏆
• Health Insurance 🧑‍⚕️(Medical, Dental, Vision, others)
• Taxes( Payroll, Social security, medicare taxes etc) 💰
• Paid Time Off( Vacation+Sick days) 🎡
• Retirement Benefits 💸(Simply IRA, 401K etc)

Overhead costs refer to all expenses outside of labor costs, including payroll taxes, benefits, insurance, paid time off, meals, training, software subscriptions, equipment or supplies, gifts, building costs, property taxes, and utilities. These costs can be calculated monthly or annually, depending on the type of expense, and should be divided as a per-employee expense and added to the total that an employee costs you.

Consultant expenses include:

Hourly/ Project-based fees
Commissions
Legal Support
Software/Hardware

Calculating Employee cost for better understanding:

The standard work hours per year = 2080
(40 hours per week * 52 weeks per year)

Assume the annual salary as an employee to be $125,000, and thus the hourly rate will be $125,000/2080= $60

Let’s assume fringe benefits to be 40%
(These benefits can include health insurance, retirement plans, paid time off, life insurance, and other uses intended to increase the overall value of the employee’s compensation package.)

So 40% of $60 = $24, Total hourly cost will be $60+$24 = $84/hour

Buckle up for a wild ride of direct and indirect costs!

Calculating the direct and indirect costs of hiring an employee is essential. Considering all associated expenses is critical to determining how much an individual will cost to hire. Prepare for your journey and note all the expenses that may arise.
Listed below item such as:

Direct costs:

Indirect costs:

Do you need clarification?

Please sit, breathe, and let’s put our heads together. We understand the challenges you may be facing and are here to assist you in any way we can. Let’s take a moment to reflect and find the best solution to move forward with confidence.

With numbers dancing in your head, you might need clarification about what to consider and what is left behind. You might need help keeping track of all the calculations and equations. It can be simple to hire a consultant.

So now you can say math is easy-peasy. If you hire a consultant, let’s say at $60/hour to complete the same task. So that’s what you must pay ( including software or legal support). Fringe or other overheads are not a part of it.

“When you step back & do the math, you might find that a consultant can save your cash.”

Now you understand that most companies are unaware that hiring employees can cost them a lot of money. If companies calculate the actual cost of the employees, there’s a higher probability that organizations would have saved a lot by employing consultants. So whether you are a product-based or service-oriented company, these mistakes can severely hurt your bottom line & can also cause you a lot more money in delivering a service than what you are billing for.

“In reality, the cost per employee goes far beyond annual pay and hourly rates, deviating significantly from initial calculations. This emphasizes how expensive employee expenses are.”